This newsletter provides a summary of tax developments and Inland Revenue publications that have been released in January through March 2023.

Coverage of significant tax developments, as they happen, and KPMG’s insights into these will continue to be covered in Taxmail (which you can subscribe to here). 

The purpose of Tax Round Up is to provide a regular comprehensive summary of tax policy, legislative and administrative developments, including Inland Revenue releases, and KPMG’s submissions and other publications which may be of interest.  Please contact your usual KPMG tax advisor or this publication’s authors if there are any matters you wish to discuss.  

Note: to assist readers we have included hyperlinks in this newsletter to the majority of source documents referenced.  While these are accurate as at the date of publication, we cannot guarantee that all links to external sources will remain active. 

Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023

The Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Act 2023 (“the Act”), available here, received royal assent on 31 March 2023. 

The draft legislation (“the Bill”) was reported back from the Finance and Expenditure Committee (“FEC”) on 2 March with a number of recommendations and amendments.  You can read KPMG’s Taxmail on the Bill as reported back here (and KPMG’s Taxmail on the Bill as introduced here.) The reported back Bill, the FEC’s report and Officials’ Report on submissions are available here.

The new Act includes an FBT exemption for employer provided bicycles, e-bikes, scooters and mobility devices as well as a number of tax relief measures for those impacted by the North Island adverse weather events in January and February. You can read KPMG’s Taxmail on these two late breaking developments here.

Inland Revenue administrative relief measures

In addition to the relief measures in the Act (see above) for those impacted by the adverse weather events:

  • Inland Revenue (“IR”) will remove late filing and late payment penalties for taxpayers who are unable to file returns on time due to these events.  IR has said affected taxpayers do not need to contact them now and should focus on the clean-up.  Taxpayers have been instructed to contact IR using myIR (including the word ‘cyclone’) or call their disaster line 0800 473 566 when they are able.
  • IR will write-off interest charged on late tax payments until 30 April 2023 for taxpayers in the North Island affected by the flooding events and until 30 June 2023 for taxpayers affected by Cyclone Gabrielle;
  • An extension of time for donated trading stock relief (originally introduced as a COVID-19 relief measure) has been made.  The concession for donated trading stock has been extended to 31 March 2024;
  • An extended deadline will apply to businesses claiming the R&D tax incentive; and
  • IR has declared these emergency events for the purposes of family scheme income, meaning a payment made between 26 Jan 23 to 31 Aug 23 (inclusive) to relieve adverse effects of these events will not be included in a person’s family scheme income.

Tax Counsel Office delays publishing private ruling summaries

IR’s Tax Counsel Office (“TCO”) was set to begin publishing Technical Decision Summaries (“TDSs”) of private rulings for ruling applications received on or after 1 January 2022, in addition to TDSs for completed adjudication decisions. 

While the adjudication TDSs have been published since late 2021, TCO has not published any TDSs for private ruling decisions completed in 2022.  TCO has announced its decision not to publish any TDSs for private rulings completed in 2022 due to the time that has now elapsed.  TCO has advised that it will only begin to publish rulings where:

  • An application for a private ruling was received on or after 1 January 2022; and
  • The private ruling was completed by TCO on or after 1 January 2023.

KPMG submissions on recent IR publications

KPMG has made submissions on three Inland Revenue publications:

  • Inland Revenue’s Long-Term Insights Briefing 2022 | 24 February 2023
  • PUB00443: Foreign investment fund (FIF) default calculation method | 7 March 2023
  • ED024: Determination EE004 – Tax treatment of reimbursing payments made to employees that work from home etc. | 29 March 2023

Copies of our submissions are available here.

KPMG social media on topical tax issues

Additional KPMG insights into topical tax issues have been published on LinkedIn, which you can read by following the links below:

Understanding the metaverse: Tax strategy and other considerations

Global Family Business Tax Monitor

Directorships - GST Update

Summary of Inland Revenue publications released in January to March 2023

We have set out chronologically below a summary of other IR tax items released in the January to March period that may be of interest: 

Issued: 10 January 2023

Inland Revenue has published new website guidance which expands on the information in the binding rulings guide (IR715) for taxpayers who are deciding whether to apply for a ruling.

Among other things, this guidance covers the purpose of a pre-lodgement meeting (“PLM”), information taxpayers need to provide before a PLM, who should attend the meeting, relevant timeframes, locations and agendas.

Links: IR Website

Relevant dates: Guidance applies from publication date

Issued: 25 January 2023

This determination issued by Inland Revenue applies to an attributing interest in a foreign investment fund (“FIF”) that is a direct income interest held by a New Zealand resident investor in the Plato Global Fund, which is an Australian Unit Trust (a non-resident issuer) known as the Two Trees Global Equity Macro Fund – Class Z.

Subject to various conditions, the determination provides that units in the Plato Global Fund is a type of attributing FIF interest for which a New Zealand investor may use the Fair Dividend Rate (“FDR”) method to calculate FIF income.  From a policy perspective, the FDR method is not intended to apply to investments that provide New Zealand investors with a return similar to NZD-denominated debt instruments.  Inland Revenue has concluded that although the Plato Global Fund may have assets predominantly comprising financial arrangements, the overall investment contains sufficient risk that the investment is not akin to a NZD-denominated debt instrument and accordingly the FDR method should be available for applicable investors.

Links: FDR 2023/01

Relevant dates: Applies for 2023 and subsequent income years

Issued: 3 February 2023

This comprehensive interpretation statement (running 137 pages) replaces IR’s 2013 statement on tax avoidance (IS 13/01) and has been updated to reflect the Commissioner’s views in light of the Supreme Court’s recent decision in Frucor Suntory New Zealand Ltd v CIR [2022] NZSC 113. 

Broadly, the Commissioner considers that the Supreme Court in Frucor has consistently applied the Parliamentary contemplation test set out in Ben Nevis Forestry Ventures Ltd v CIR [2008] NZSC 115 and as applied in Penny v CIR [2011] NZSC 95 (also known as Penny & Hooper). Accordingly, there have not been any substantive changes to the Commissioner’s view on the law of tax avoidance in New Zealand. 

Concurrently, IR has released two Questions We’ve Been Asked (“QWBAs”) covering scenarios on tax avoidance to help illustrate the Commissioner’s approach taken in particular situations.  These QWBAs update and replace previous tax avoidance QWBAs from 2014 and 2015.  The answers as to whether s BG 1 applies to the scenarios covered have not changed, however certain scenarios from the earlier QWBAs have been omitted due to subsequent legislative changes (e.g. the related party debt remission rules in s EW 46C enacted in 2017). 

Links:    IS 23/01

Fact Sheet

QB 23/01

QB 23/02

Relevant dates: 3 February 2023

Issued: 22 February 2023

This technical decision summary (“TDS”) of a Tax Counsel Office (“TCO”) adjudication decision (on 30 June 2022) relates to a dispute over the correct income tax treatment of amounts received by a taxpayer from their former employer under a settlement agreement.  The employer had withheld PAYE from the payments (described as payments of salary and wages in the settlement agreement) however the taxpayer argued that the payments should not be taxable on the basis they were in the nature of compensation for humiliation, loss of dignity and injury to feelings.  The taxpayer also argued the settlement agreement was a “sham” to the extent it described the payments as being for salary and wages.

TCO concluded that the settlement payments were not in the nature of payments for hurt and humiliation (and accordingly should be taxable) and that the settlement agreement was not a “sham” insofar as it described the payments as ordinary salary or resignation payments.

Links:   TDS 23/01

Relevant dates: n/a

Issued: 22 February 2023

IR has released three public rulings addressing the GST treatment of directors’ fees for directors of companies (BR Pub 23/01), and board members’ fees where appointed by the Governor-General (BR Pub 23/03) or not appointed by the Governor-General (BR Pub 23/02). 

BR Pub 23/01 replaces a 2015 statement on directors’ fees which will be withdrawn on 31 March 2023.  The GST treatment of professional directors and board members is not, according to the Commissioner, a change in his views. However, for the first time the Commissioner has published his view that a person who provides only directorship services is not eligible to be registered for GST. Generally, the provision of directorship services is not a taxable activity in its own right and therefore a person who only provides directorship services (e.g. professional directors) should not be registered or charge GST.  GST is generally only chargeable where a registered person accepts a directorship in the course of carrying on their taxable activity (e.g. an accountant who is registered for GST is asked to serve on the board of directors of a client company).

Different outcomes may apply if the director accepted the office as an employee of a third party (the employer may be required to return GST) or as a partnership in a partnership (the partnership may be required to return GST).

Given some professional directors have incorrectly taken the view that their directorship services constitute a taxable activity, IR has also released Operational Position OP 23/01 to provide guidance on correcting their positions.

OP 23/01 provides that the Commissioner will not require incorrectly registered taxpayers to retrospectively deregister, however where they otherwise have no basis for registration taxpayers will generally be required to deregister with effect from 30 June 2023.  On deregistration a director may be required to return GST on the market value of any goods and services that they retain that were previously treated as part of their taxable activity.

Links:   BR Pub 23/01 to 23/03

Fact Sheet

OP 23/01

Relevant dates: Apply from 1 April 2023 for an indefinite period

Issued: 24 February 2023

IR has released an updated Standard Practice Statement (“SPS”) discussing the rights and responsibilities of taxpayers and the Commissioner when either party commences a dispute in relation to an assessment (including adjustments to assessments) or other disputable decision. 

The SPS consolidates and replaces two statements from 2016 which separately discussed disputes commenced by the Commissioner and disputes commenced by taxpayers, respectively.  While IR’s positions have not materially changed, there are a number of additions and amendments, including:

  • Taxpayers with only “reportable income” (income IR receives regular information about) may qualify to have an assessment corrected without a notice of proposed assessment (“NOPA”);
  •  How income is assessed and how (and when) a taxpayer can dispute an assessment where the Commissioner issued a deemed assessment of reportable income;
  • What occurs when a taxpayer’s dispute document does not meet the required standard (is deficient); and
  • Where there is an existing dispute, how an additional adjustment (or increase in a taxpayer’s tax liability) may be proposed.

Links:   SPS 23/01

Relevant dates: Applies from 24 February 2023

Issued: 24 February 2023

IR has published a determination which lists the national standard costs for specified livestock pursuant to s EC 23 of the Income Tax Act 2007.  This covers livestock in the categories of sheep, dairy cattle, beef cattle, deer, pigs, dairy goats and goats for meat and fibre.

Links:   NSC 2023

Relevant dates: Applies to livestock on hand at the end of the 2022-23 income year

Issued: 7 March 2023

IR has published a determination setting out the amortisation rates for landfill cell construction expenditure for taxpayers who meet the criteria under s DB 46 of the Income Tax Act 2007 and have incurred landfill cell construction expenditure in an income year starting on or after 1 April 2022.

The rates are set at either 63.5% straight-line equivalent, or 63.5% diminishing value.

This determination replaced DET 05/02 (issued in November 2005). 

Links:   DET 23/01

Relevant dates: Applies from the 2022-23 income year

Issued: 7 March 2023

This draft Question We’ve Been Asked (“QWBA”) considers whether individual GST-registered members of an unincorporated body (which is not itself liable to or does not register for GST) can claim input tax deductions:

  1. for their share of costs incurred by the unincorporated body; and
  2. for their contributions to the unincorporated body.

IR concludes that no, input tax deductions are not available for the individual members in either case (except in limited circumstances for question number 2). 

As to question one, this is because an unincorporated body is treated as a person for GST purposes and the unincorporated body is the person who acquires the goods and services.  Individual members cannot claim input tax deductions because they are not the persons who have acquired the goods and services for GST purposes, even where they are participating in an unincorporated body that is not GST registered.

As to question two, this is because contributions made to establish a new unincorporated body are not made in exchange for a supply. However, in limited circumstances it is possible that a new member may be able to claim input tax deductions in relation to acquiring interests in an existing unincorporated body from another member.

Links:   PUB00356

Relevant dates: Submissions are due on 18 April 2023.  Once finalised, the QWBA is expected to apply from publication date.

Issued: 13 March 2023


This is a set of four draft public rulings, which are re-issues of public rulings released in 2019 and 2021.  In each case they are stated to contain minor clarifications only without changes to the substantive conclusions.

The four rulings relate to the following topics:

  1. Salary and wages paid in cryptoassets (re-issue of BR Pub 21/01)
  2. Bonuses paid in cryptoassets (re-issue of BR Pub 21/02)
  3. Employer issued cryptoassets provided to an employee (re-issue of BR Pub 19/03)
  4. Application of the employee share scheme rules to employer issued cryptoassets provided to an employee (re-issue of BR Pub 19/04)

Links:  PUB00447-1, PUB00447-2, PUB00447-3, PUB00447-4

Relevant dates: Submissions are due on 20 April 2023.  Once finalised, the each of the four public rulings will apply for an indefinite period beginning on the issue date.

Issued: 15 March 2023

This is a set of five draft public rulings, which are re-issues of public rulings released in 2020.  The rulings address the New Zealand tax implications for resident investors who invest in United States (“US”) limited liability companies (“LLCs”) that are fiscally transparent for US income tax purposes (the rulings are only applicable for interests in US LLCs which have not elected to be taxed as corporations in the US).  In each case the draft rulings are stated to contain minor clarifications only without changes to the substantive conclusions reached in the 2020 rulings.

The five rulings cover:

  1. Dividends derived by a New Zealand resident investor in a US LLC that is a FIF, where the total cost of all the investor’s attributing interests in $50,000 or less
  2. FIF income and dividends derived by a New Zealand resident investor in a US LLC who applies the fair dividend rate (“FDR”), comparative value (“CV”), cost method or deemed rate of return (“DRR”) method for calculating FIF income
  3. Attributed FIF income and dividends derived by a New Zealand resident investor in a US LLC who can adopt and chooses to adopt the attributable FIF income method for calculating FIF income (where the FIF is not a non-attributing active FIF)
  4. Attributed CFC income and dividends derived by a New Zealand resident investor in a US LLC that is a controlled foreign company (“CFC”) (other than a non-attributing active CFC)
  5. Dividends derived by a New Zealand resident investor in a US LLC that is either a non-attributing active FIF or a non-attributing active CFC

Given the complex and highly technical nature of the applicable rules, the rulings are accompanied by detailed Inland Revenue commentary (including flow-charts and tables to assist taxpayers to determine which ruling applies to their situation).

Links:  PUB00445

Relevant dates: Submissions are due on 26 April 2023.  Once finalised, the each of the five public rulings is proposed to apply from 26 June 2023 to 25 June 2028.

Issued: 20 March 2023 (approved by Commissioner 27 February 2023)

This is the Commissioner’s statement on Inland Revenue’s “Technical Issues Escalation Policy” and process. 

The escalation policy is IR’s process designed to ensure that staff apply IR’s view of the law consistently, while enabling a view to be reconsidered if a staff member think it is incorrect. The policy does not give taxpayers the right to have issues reconsidered, however it sets out obligations for all IR staff making technical decisions.  In particular, with limited exceptions, IR staff must not apply an interpretation or position to a taxpayer (including in litigation and settlement) when they are aware this would be inconsistent with IR’s existing view.

According to the Commissioner, the purpose of this process is to:

  • maximise certainty for IR staff and taxpayers by establishing a consistent approach to technical decisions;
  • constructively address and resolve differences of technical views within IR; and
  • build positive taxpayer perceptions of the integrity of the tax system and so promote voluntary compliance with tax legislation.

Links:  CS 23/01

Relevant dates: Applies from 27 February 2023

Issued: 22 March 2023

Inland Revenue has released its much-anticipated analysis on the tax treatment of software as a service configuration and customisation (“SaaS C&C”) costs, in draft, for consolidation.

KPMG’s detailed summary and commentary on this item is available here.

At a high level, the draft interpretation guideline provides:

  • SaaS C&C costs are broadly defined as those incurred in integrating a SaaS application into an existing system. “Configuration” includes defining values or parameters for the software’s code to function in a particular way while “customisation” includes changing or adding to the software’s functionality. 
  • The income tax treatment of SaaS C&C costs will depend on the contractual agreements in place and the services under those agreements.
  • There will be a nexus with income for SaaS C&C costs, but consideration will need to be given whether the expenditure is capital in nature.
  •  In some cases, an immediate deduction may be available if the requirements of section DB 34 of the Income Tax Act 2007 are met.
  • In other cases, the SaaS C&C costs will need to be capitalised either as depreciable intangible property (“DIP”) (as part of the right to use software under a SaaS arrangement) or as fixed life intangible property (“FLIP”) (depending on the legal term of the particular SaaS arrangement).
  • Different tax depreciation rates may apply. If DIP, the software rate can be used. If FLIP, the depreciation rate is based on the legal term. However, if a SaaS arrangement is longer than 4 years, the Commissioner considers that the capitalised C&C costs cannot be FLIP (as that is more than the estimated useful life for the underlying software) and must be depreciated at the software rate.

Links:  PUB00464

Relevant dates: Submissions are due 3 May 2023.

Issued: 27 March 2023

This determination discusses options available to employers who wish to reimburse employees for certain expenses employees incur when working from home and/or using their personal telecommunications tools/usage plans in their employment.

Broadly, such payments are taxable to employees unless the payment is exempted under s CW 17. Due to the complexity of these rules and administrative difficulties for employers, IR previously published DET EE003 which effectively provided “safe harbour” thresholds under which IR would treat amounts as being an exempt allowance.  DET EE003 expired on 31 March 2023, and IR has replaced it with DET EE004 which applies from 1 April 2023 with no stipulated end date.  The new determination provides modest increases to the weekly thresholds as follows:

  • to reimburse the employee for working from home, $20 per week (previously $15 per week); and
  • to reimburse the employee for the use of personal telecommunications equipment and/or usage plans, $7 per week (previously $5 per week).

In the case of payments to employees for the cost of newly acquired items, the determination provides for exempt income treatment under a “safe harbour” option for:

  • payments up to $400 to reimburse employees for the cost of acquiring new telecommunications equipment (no change from previous determination); and
  •  payments up to $400 to reimburse employees for the cost of acquiring new furniture and other office equipment (no change from previous determination).

These are one-off amounts (i.e. an employer cannot make annual payments of this nature and treat as exempt income for employees) and apply to all equipment the employee acquires (they are not item-by-item limits). 

As an alternative, employers can choose the “reimbursement option”, where up to 100% of the yearly depreciation loss for the asset (or total cost of the asset for low-value assets) can be reimbursed to employees as exempt income, however this requires evidence that the asset is being used exclusively for employment purposes.  Different apportionment approaches apply where the assets are being used for a mix of employment and private purposes, and this can be more onerous for employers to validate (this is one of reasons the $400 safe harbours are available in the alternative).

Links:   DET EE004

Relevant dates: Applies to relevant employer payments from 1 April 2023.

Issued: 29 March 2023

This technical decision summary (“TDS”) of a Tax Counsel Office (“TCO”) adjudication decision (on 21 October 2022) relates to:

  • a number of unexplained deposits into bank accounts owned by an individual taxpayer (and associates of the taxpayer) in the 2010 to 2012 and 2016 income years;
  •  the deductibility of interest paid on a mortgage for the taxpayer’s family home; and
  • whether the taxpayer was liable for evasion shortfall penalties and increased penalties on account of obstruction.

TCO concluded that:

  •  the deposits made in the 2016 income year were assessable income to the taxpayer, as they had not satisfied their burden of proof that the amounts were not income (the burden sits with a taxpayer to explain why unexplained deposits are not income);
  • the deposits made in the 2010 income year were not assessable (yet), due to technical formalities not being followed by Inland Revenue (these adjustments were proposed on a letter made after IR’s Statement of Position (“SOP”) and TCO said that IR would need to issue a new Notice of Proposed Adjustment (“NOPA”) if it wished to re-assess these amounts);
  •  the Taxpayer was not entitled to the interest deductions (IR contended the interest expense was private in nature relating to the taxpayer’s family home and the taxpayer failed to prove the expense related to a rental property);
  • evasion penalties should be applied as proposed for the 2012 and 2016 income years, but not for the 2011 income year (the gross carelessness penalty should be imposed for the 2011 income year), in both cases reduced by 50% for previous behavior; and
  • all penalties should be increased by 25% for obstruction (IR satisfied its onus of proving on the balance of probabilities that the taxpayer obstructed the Commissioner in determining the correct tax position, on account of the taxpayer’s continual and undue delays, misleading statements, diversion of income into relatives’ bank accounts, and repeated failure to be forthcoming with information).

Links:   TDS 23/02

Relevant dates: n/a

Issued: 31 March 2023


These two Questions We’ve Been Asked (“QWBAs”), and the accompanying Fact Sheet, relate to certain payments that parents make to their child’s childcare centre.  At a high level, parent’s payments that are fees will not be donations (no donation tax credit available) and GST will likely apply, whereas payments that are gifts will frequently qualify as donations and GST generally will not apply.


QB 23/03 explains when a payment will qualify for a donation tax credit for income tax purposes. In some cases parents have incorrectly treated payments as “donations” when the payments were in fact in substitution for paying no or low childcare fees (or the parents or child gained some other material benefit in exchange for the payment).  QB 23/03 explains that the payment will only qualify (as a gift) where:


  •  the childcare centre is a donee organisation (a searchable database of approved donee organisations is available here);
  • the payment is money of $5 or more;
  • the parent makes the payment voluntarily to benefit the centre either generally or for a specific purpose or project; and
  • the parent or child gains no material benefit or advantage in return for making the payment.

QB 23/04 explains when a parent’s payment to the child’s childcare centre will be subject to GST.  Such payments will usually be subject to GST, at the standard 15% rate, where:

  • the childcare centre is GST registered (or should be GST registered); and
  • the payment is made for the supply of early childhood education, childcare services or related goods.

However, if the parent makes an unconditional gift (including some types of koha) to a childcare centre that is a non-profit body, then that payment is not subject to GST. Only childcare centres that are non-profit bodies (as defined for GST purposes) can receive unconditional gifts for GST purposes.

Links:    QB 23/03

            QB 23/04

            Fact Sheet

Relevant dates: Guidance applies from date of issue 31 March 2023

Issued: 31 March 2023

Inland Revenue has published an exemption for the 2023 income tax year for New Zealand residents to disclose certain overseas interests.  The scope of this exemption (which the Commissioner has the power to make under the Tax Administration Act 1994) mirrors the disclosure exemption made for the 2022 tax year.

Specifically, the exemption removes the requirement for a resident to disclose:

  • A portfolio interest (less than 10%) in a foreign company, if either that income interest is not an attributing interest in a FIF or it falls within the $50,000 de minimis exemption (note the de minimis exemption does not apply to a person that has opted out of the de minimis threshold by including an amount of FIF income or loss in their income tax return for year).
  • If the resident is not a widely-held entity, an attributing interest in a FIF that is a direct income interest of less than 10%, if the foreign entity is incorporated (in the case of a company) or otherwise tax resident in a DTA country or territory, and the FDR or CV method of calculation is used.
  • If the resident is a widely-held entity, an attributing interest in a FIF that is a direct income interest of less than 10% (or a direct income interest in a foreign PIE equivalent) if the FDR or CV method is used for the interest. The resident is instead required to disclose the end-of-year New Zealand dollar market value of all such investments split by the jurisdiction in which the attributing interest in a FIF is held or listed.

The 2023 disclosure exemption also removes the requirement for a non-resident or transitional resident to disclose interests held in foreign companies and FIFs.

Links:   ITR34

Relevant dates: Applies for the 2023 income tax year

Issued: 31 March 2023

This draft interpretation statement (and accompanying draft Fact Sheet) considers the deductibility of holding costs for land (e.g. interest, rates and insurance), and whether income from the disposal of the land being taxed on sale (e.g. under the bright-line test) is relevant to deductibility.  The statement does not apply to capital improvements or other capital expenditure.  

Broadly, the interpretation statement concludes that:

  • Where land is held on capital account but ends up being taxed on sale (e.g. under the bright-line test), it cannot be said that the use of the land is holding it for income-earning sale (no nexus with the expenditure), so holdings costs are not deductible merely because the land ends up being taxed on sale.  However, holding costs may be deductible as incurred to the extent there is current year income-earning use (e.g. rental).
  • Where land is held on revenue account (e.g. acquired for the purpose of disposal), then the holding of the land itself is a use for income earning (taxable disposal of land) meaning there is nexus with the holding costs, even if the property is not rented.  However, the private limitation denies deductibility to the extent the expenditure is of a private or domestic nature, so it may be necessary to apportion holding costs (with the expenditure being only party deductible) where the property is used for private or domestic purposes.

The interpretation statement then considers a number of related issues, including:

  • How expenses should be apportioned where there are current year income-earning and private uses of the land.  This further depends on whether the mixed-use assets (“MUA”) rules apply for the land.  In either case, different rules may apply depending on whether the land is held on capital account or on revenue account.
  • Whether holding costs are part of the “cost” of the property, so deductible under s DB 23 on a taxable sale.  The Commissioner’s view is that holding costs do not form part of the “cost” of the property so are not deductible under s DB 23 on sale (other than interest in some cases due to operation of the interest deduction limitation rules discussed below). 
  • How the interest deduction limitation rules in subpart DH interact with these rules.  In certain situations interest expenditure for which deductions were denied under the interest limitation rules becomes deductible on sale of the property.  The rules are different depending on whether the sale is taxable under the bright-line test or under other land sale provisions. 
  • How the residential loss ring-fencing rules may further limit deductibility.  However, the ring-fencing rules are outside the scope of the interpretation statement so are only briefly noted as warranting consideration.

Links:    PUB00417

Fact Sheet (draft)

Relevant dates: Submissions are due 31 May 2023.